Scott Killingsworth agrees with Warren Buffett: "Culture more than rule books determines how an organization behaves."
Killingsworth is deep into the prevention side of the corporate crime business.
He delves into the research on how cultural factors and power dynamics affect boards of directors and people in the top executive suites of major corporations.
Killingsworth lays out his arguments in a paper titled "C Is for Crucible: Behavioral Ethics, Culture, and the Board's Role in C Suite Compliance."
He agrees with Buffett that culture trumps rules.
"I'm interested in changing behavior," Killingsworth told Corporate Crime Reporter in an interview last week. "I'm interested in influencing behavior on a large scale within the corporation. The reason I got into the social science part of it was first, because that's where my education was in college."
"But second, when I was doing a compliance program build out for a Fortune 500 company back in 2004 or so, we had resource constraints. And the question became what works? What makes a difference? Not checking the boxes as to what the official elements of a good compliance program are. But what makes a difference in outcomes?"
"And the data I found is that cultural messages, the value messages within a corporation, group identity, the establishment of healthy behavioral norms within a company these are things that are cheap to do, fairly easy to do, although they don't happen overnight, and they produce highly measurable results."
"So, you are free to think that culture is a fuzzy concept and you are free to think that it is all blowing smoke. But you really ought not to be free to ignore the data. And there is a lot of data out there on the effectiveness of these techniques. So, I feel my clients ought to know about it."
"There is an old saying everybody is entitled to their own opinions but not to their own facts."
From your experience, what is the state of corporate compliance in the big firms?
"The notion that culture and values and norms within a company driving compliance outcomes is becoming more and more accepted. And there are a lot of major companies that have substantial values based, culture based attributes in their compliance programs. I just couldn't give you a percentage."
"People have been touting the value of building a good organizational culture for years. Many have been crying in the wilderness. But the message is starting to get heard and repeated in places where it counts like in the Sentencing Guidelines, like prosecutors saying it when they give speeches, SEC people saying we look at your culture first of all."
"There is a lot of research out there that illuminates influences on our behavior not related to a simple risk reward equation where somebody looks at a situation, looks at a temptation, computes the likelihood of getting caught, multiplies that by the amount of money they could make by misbehaving, and then makes a rational decision based on that computation. That is not what drives human behavior."
"For the most part, human behavior is driven by contextual cues and below the level of consciousness motivations that we need to be aware of. We need to stop thinking in terms of risk, reward, punishment and deterrence."
"We also have to stop thinking in terms of why are some people bad people? There are bad people, but it's a small minority. Instead of asking why are some people bad, we should ask ourselves why are people sometimes bad?"
"All of us can get in trouble. And we can make mistakes even though we are good people and we think we are good people, because we are influenced by group identification, values, culture."
"As Warren Buffett said behavior is influenced much more by culture than by rulebooks."
So, the shorthand of your paper is tone at the top?
"It's about what you do as opposed to or in addition to what you say," Killingsworth says. "Your tone is no better than your actions."
You use the term motivated blindness. What is that?
"Motivated blindness is when you don't recognize facts that are sitting in front of you because they would be inconvenient for you to recognize," he says.
"Suppose you are a major league general manager in baseball and one of your players over the course of an off-season gains 35 pounds of muscle and starts hitting home runs everywhere. And he starts setting records and a lot of people come to the ballpark. And your attendance is doubled and the team is making a lot more money."
"In a case like that, you might find yourself failing to ask the question how did he gain so much muscle so quickly?"
"That's a really good example of motivated blindness."
"Another example is when your best friend is misbehaving. There is study after study that shows that the closer you are to a person, the more likely you are to overlook their misbehavior, to deny that it is misbehavior, to actually emulate their misbehavior and to come up with justifications as to why they behaved the way they did."
"That's motivated blindness. That's why often after misconduct is uncovered, the first question is how could you have ignored this?"
"You ignored it because you didn't want to see it. And you didn't want to see it below the plane of conscious thought."
"That's a lot of what is in the paper. There is a lot of stuff that goes on in the human psyche below the plane of conscious thought that influences our behavior. And it's useful to have an idea of what some of those factors are and how they operate."
What is an example of corporate leadership that reflects what you are talking about?
"There is a story about Progressive Insurance," Killingsworth says. "They insured an awful lot of cars in Louisiana. After Katrina hit, they realized that if they just paid salvage value for the cards, and bought cars from people that were damaged in the floods and then put them out in the wholesale market, what might happen is that some guy in Montana would buy a car that's flood damaged without knowing it."
"They also realized that if they took the other approach and just paid the policy holders the diminution in value of their vehicles -- your car was flood damaged, here is $1,000, keep the car -- that those cars might also be sold and end up the hands of innocent consumers who didn't know about the flood damage."
"Instead, Progressive went ahead and totaled out every car that had flood damage that they had insured and they crushed them. They took it on the chin to protect the public from being unwitting victims of motor vehicle fraud."
"If you work for Progressive, what are you going to think about your leadership? You are going to think these people put doing the right thing above profits. I'm proud to work here. I want to emulate that example."
[For the complete Q/A transcript Interview with Scott Killingsworth, see 27 Corporate Crime Reporter 29(11), July 22, 2013, print edition only.]
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